The three white soldiers candlestick is a multi-candlestick pattern that is used to analyze stock, currency, commodity, and other chart data. This candlestick pattern is also referred to as the Three Advancing White Soldiers. It is used to forecast the change from a downtrend to an uptrend. After a protracted downtrend, this candlestick pattern develops when bullish forces prevail over bearish forces for three straight days. An exhaustive guide to trading with the Three White Soldiers Candlestick Pattern is provided below:
Three White Soldiers Pattern
A bullish candlestick pattern known as “three white soldiers” is used to forecast the reversal of the current downtrend in a pricing chart. The pattern consists of three long-bodied candlesticks that open within the real body of the preceding candle and close above the high of the preceding candle. These candlestick patterns should open within the actual body of the candle in front of them. In this pattern, their shadows should not be overly long.
The three black crows are known as the reverse of the three white soldiers. Three consecutive red candlesticks that appear at the peak of an uptrend serve as a symbol for this pattern.
How The Three White Soldiers Pattern Looks Like
The pattern resembles a staircase with each candlestick holding at least the middle of the previous day’s price range and each open above the previous day’s open. Additionally, each candle should make a new high that is higher than the previous candle. For the pattern to be regarded as legitimate;
The second candlestick must be larger than the first candle’s body.
The upper wick of the second candlestick should be minimal or nonexistent as it closes near its high.
The final candlestick should have a negligible or nonexistent shadow and be at least as large as the second candle.
How To Identify The Three White Soldiers Pattern
In order to spot the three consecutive green or white candlesticks that make up the three white soldiers’ pattern, look for them. The first must open and close lower than the others. Big bodies and tiny (or nonexistent) wicks are required for the candlesticks. The pattern is most likely to be visible at the bottom of a downtrend, as was previously mentioned.
Examples Of How to Trade Three White Soldiers
Three white soldiers are used as an entry or exit point because they form a bullish visual pattern. The three white soldiers present an entry opportunity for traders waiting to enter a bullish position. While traders who are short on security look to exit.
It’s crucial to keep in mind that strong moves higher might momentarily produce overbought conditions when trading the three white soldiers pattern. For instance, the relative strength index (RSI) may have risen above 70.0 levels. The three-soldiers pattern may occasionally be followed by a brief period of consolidation. The short- and intermediate-term bias is still bullish. The stock may consolidate after the significant move higher reaches important resistance levels before continuing to move higher.
Imagine, for instance, that a protracted bear run in EUR/USD comes to an end. It loses 100 pip points in the last period, starting at 1.0980 and ending at 1.0880. What to look for in a group of three white soldiers
A green candle rising 50 pip to approximately 1.0930
Another candle that is green and closes above 1.0980
An end-of-session green period with little to no upper wick
On the other hand, after the FTSE 100 has risen to 7100 and gained 120 points in its most recent candlestick, three black crows could form. You would be looking for three red candles in this instance. First dropping by about 60 points, second falling below 6980, and third deepening the bear run.
What Do The Three White Soldiers Mean?
The pattern signifies that a downtrend has been followed by a steady advance in buying pressure. These kinds of bullish patterns frequently indicate a reversal in price movement. When they notice the three white soldiers’ pattern, some traders consider opening a long position to profit from any upward trajectory.
How To Trade The Three White Soldiers Pattern
When you see the pattern, there are several ways to trade. First, use appropriate technical indicators to validate the signal, such as the stochastic oscillator or the relative strength index (RSI). As a result of indicators’ ability to shed more light on price trends. This can aid in validating what the candlesticks are indicating.
You can test the signal using the RSI. If you see three white soldiers at the bottom of a downtrend and you believe a reversal is imminent. This indicator can assist you in predicting price trends because it monitors the market’s speed and momentum. You might want to start a long position if the reversal is confirmed (buy).
The Difference Between Three White Soldiers And Three Black Crows
The three black crows’ candlestick pattern is the opposite of the three white soldiers. Three consecutive long-bodied candlesticks that opened within the actual body of the previous candle and closed lower than the prior candle are referred to as “three black crows.” Three black crows depict the bears regaining control from the bulls. In contrast, three white soldiers capture the change in momentum from the bears to the bulls. Both patterns are subject to the same warnings regarding the volume and additional confirmation.
Limitations of Using Three White Soldiers
During times of consolidation, three white soldiers can also appear. It is a simple way to get caught in a continuation of the current trend rather than a reversal. The volume supporting the formation of the three white soldiers is one of the important things to watch. Because the market is being driven by a select few rather than the majority, any pattern of low volume is suspicious.
This pattern and other similar candlestick patterns are used by traders in conjunction with other technical indicators like trendlines, moving averages, and bands to overcome the limitations of visual patterns. Before opening a long position, traders might, for instance, search for potential areas of resistance or check the volume during the breakout to make sure a lot of dollars were exchanged. Traders may choose to hold off on opening a long position until there is additional confirmation of a breakout if the pattern occurred on low volume and with near-term resistance.
The three white soldiers are one of the numerous candlestick formations that day traders employ to pinpoint potential stock market entries. As previously mentioned, this pattern develops at the end of a downtrend and is a blatant sign that the balance is shifting from the sellers to the buyers. In order to predict a price reversal after a downtrend, it can be helpful. This pattern ought to be your best ally if you regularly monitor the market for indicators of upward movement. The MACD crossover, breakouts or moving averages are some examples of other momentum signals that it works best with.
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